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Low-income pensioners to be spared the franking credit refund crunch?

If you read financial news it would almost been impossible to miss that Labor announced it would remove franking credit refunds from the tax system. This didn’t go down well with the people who get the refunds, particularly pensioners.

It’s understandable why pensioners would feel the most aggrieved as the refund is part of their annual calculation of how much money they have to spend each year in retirement.

Labor’s main target was the very wealthy who get huge refunds from the system, but everyone would have been caught up in this change.

However, in an article in the Fairfax Media Limited’s (ASX: FXJ) AFR it was revealed that Labor will announce an adjustment to the plan.

Low-income pensioners will likely be removed from the plan to remove refunds. The change is expected to include part pensioners and full pensioners at little cost to the budget.

Labor has been encouraged by polling showing there was support for the franking credit change among all demographics including ages, gender, share owners and people earning more than $87,000. Apparently 42% of people supported the policy whilst 35.8% were against it.

Industry Super Australia has recommended that there should be a $1,000 refund cap, with an exemption for all pensioners only costing $238 million in the first year.

A Labor source told the Financial Review “We expect to get a bit of a knock in the polls because of the scare campaign and misinformation. We’re working on ways to protect pensioners. Once that’s done Turnbull will have nowhere to hide. He’ll be left defending tax refunds for millionaires who don’t pay tax.”

Foolish takeaway

This sounds a bit better but if it’s only about pensioners it could still be unfair to on low-income people who heavily rely on the refund as part of their budget.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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